nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2021‒05‒31
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Financing the extension of social insurance to informal economy workers: The role of remittances By Alexandre Kolev; Justina La
  2. Minimum wage effects on informality across demographic groups in Colombia By Arango-Thomas, Luis Eduardo; Flórez, Luz Adriana; Guerrero, Laura D.
  3. Between toxics and gold: devaluing informal labor in the global urban mine By Corwin, Julia Eleanor
  4. Clearing the Bar: Improving Tax Compliance for Small Firms through Target Setting By Al-Karablieh, Yazan; Koumanakos, Evangelos; Stantcheva, Stefanie
  5. Local Elites as State Capacity: How City Chiefs Use Local Information to Increase Tax Compliance in the D.R. Congo By Balan, Pablo; Bergeron, Augustin; Tourek, Gabriel; Weigel, Jonathan

  1. By: Alexandre Kolev; Justina La
    Abstract: Informal employment, defined through the lack of employment-based social protection, constitutes the bulk of employment in developing countries, and entails a level of vulnerability to poverty and other risks that are borne by all who are dependent on informal work income. Results from the Key Indicators of Informality based on Individuals and their Households database (KIIbIH) show that a disproportionately large number of middle‑class informal economy workers receive remittances. Such results confirm that risk management strategies, such as migration, play a part in minimising the potential risks of informal work for middle‑class informal households who may not be eligible to social assistance. They further suggest that middle‑class informal workers may have a solvent demand for social insurance so that, if informality-robust social insurance schemes were made available to them, remittances could potentially be channelled to finance the extension of social insurance to the informal economy. L'emploi informel, défini par l'absence de protection sociale basée sur l'emploi, constitue la majeure partie de l'emploi dans les pays en développement, et entraîne un niveau de vulnérabilité à la pauvreté et à d'autres risques qui sont supportés par tous ceux qui dépendent des revenus du travail informel. Les résultats de la base de données des Indicateurs clés de l'informalité en fonction des individus et leurs ménages (KIIbIH) montrent qu'un nombre disproportionné de travailleurs de l'économie informelle de la classe moyenne reçoivent des transferts de fonds. Ces résultats confirment que les stratégies de gestion des risques, telles que la migration, jouent un rôle dans la minimisation des risques potentiels du travail informel pour les ménages informels de la classe moyenne qui peuvent ne pas être éligibles à l'aide sociale. Ils suggèrent en outre que les travailleurs informels de classe moyenne peuvent avoir une demande solvable d'assurance sociale, de sorte que, si des régimes d'assurance sociale respectueux de l'informalité leur étaient accessibles, les transferts de fonds pourraient potentiellement être canalisés pour financer l'extension de l'assurance sociale à l'économie informelle.
    Keywords: development, informal workers, middle class workers, migrant workers, migration, poverty, remittances, risk-pooling, savings, social insurance, social protection
    JEL: E26 F22 F24 G52 H55 I38
    Date: 2021–05–26
  2. By: Arango-Thomas, Luis Eduardo; Flórez, Luz Adriana; Guerrero, Laura D.
    Abstract: We present evidence of the minimum wage effects on labour informality rates in Colombia. Our identification strategy consists of dividing the working population into sixteen groups depending on their age, gender and educational level to observe how the variations in the minimum wage with respect to the 70th percentile of the distribution of salaries corresponding to the demographic group of each individual, affects the probability of having an informal occupation. The results suggest that the higher the value of the minimum wage ratio the higher will be the probability of being informal. An increase of one percentage point (pp) in the ratio of the minimum wage increases the probability of having an informal job by 0.21 pp. This effect may be greater in cities with higher informality rates and consequently with lower labour productivity of less educated workers. Our results also present evidence of non-linear effects, which suggests that workers whose labour productivity is less than the minimum wage are more likely to have informal jobs.
    Keywords: minimum wage; labour informality; heterogeneity
    JEL: J21 J30 J46 O17
    Date: 2021–05
  3. By: Corwin, Julia Eleanor
    Abstract: Environmental discourses on electronic waste have converged around two framings of e-waste as a significant global concern: as a polluting and hazardous waste product, and as an under-tapped source of value: an “urban mine.” This paper argues that the discursive shift between these two framings is not based in material differences between either the electronics themselves or related labor processes; instead, the major determining factor in e-waste’s categorization as hazard or resource is based on the category of labor working on it and where it is located. Drawing on research in India’s used electronics industry, this paper argues that when associated with informal labor in the Global South, e-waste is easily devalued and judged a hazardous waste through devaluing the labor that works on it. The conflation of pollution with informal labor in the Global South offers such a powerful narrative, particularly in governance and industry circles, that it has become a significant way to devalue e-waste in the Global South, opening up “new” frontiers of value that would otherwise be captured by local, predominantly informal, industry. Thus, environmental concerns about the hazards of e-waste can be used to secure corporate e-waste markets through devaluing informal labor.
    Keywords: informal labor; devaluation; electronic waste; urban mining; refurbishment
    JEL: N0 R14 J01
    Date: 2019–11–18
  4. By: Al-Karablieh, Yazan; Koumanakos, Evangelos; Stantcheva, Stefanie
    Abstract: We use a new dataset consisting of the universe of Greek corporate tax returns matched to financial statements to study a voluntary tax compliance program for small firms. This "self-assessment" program prescribed target taxable profit margins for different types of activity. Firms that reported profit margins above these targets in a given year were exempt from audits in that year. We find that the firms that take-up the program report significantly larger taxable profits than non-eligible firms, with some evidence of longer-lasting effects on tax reporting. Taxable profits increase by up to 70% of their pre-program levels. We also find that firms can easily and substantially manipulate reported revenue (decreasing it by up to 40%) to help meet prescribed profit margins. Overall, the program increased tax revenues collected from small firms, but points to a very large level of baseline under-reporting of profits and showcases the ease of manipulating reported revenues.
    Keywords: Amnesty; Corporate taxation; Tax avoidance; Tax compliance; taxation
    JEL: H20
    Date: 2020–08
  5. By: Balan, Pablo; Bergeron, Augustin; Tourek, Gabriel; Weigel, Jonathan
    Abstract: Historical states with low capacity often delegated tax collection to local elites, despite the risk of mismanagement. Could this strategy raise revenues without undermining government legitimacy in fragile states today? We provide evidence from a randomized policy experiment assigning neighborhoods of a Congolese city - spanning 45,162 properties - to tax collection by state agents or by city chiefs. Chief collection raised property tax compliance by 3.3 percentage points, increasing revenues by 43%. Although chiefs collected more bribes, we find no evidence of mismanagement or backlash on other margins. Results from a hybrid treatment arm in which state agents consulted with chiefs before collection suggest that chief collectors achieved higher compliance by using local information to more efficiently target households with high payment propensities, rather than by being more effective at persuading households to pay conditional on having visited them.
    JEL: D73 H20 P48
    Date: 2020–08

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